Transatlantic Subnational Innovation Competitiveness Index 3.0

Key Takeaways

• The United States boasts 7 states in the top 10, led by Massachusetts, California, Delaware, Maryland, and Washington. All U.S. states fall in the top 119 out of 213.

• Two Swedish regions, the Greater Metropolitan Region and West Sweden, rank in the top 10 due to their strong knowledge economy and innovation capacity.

• While only one German region ranks in the top 10 (Baden-Württemberg), all German regions perform better than the median region.

• The capital cities of countries tend to be the best-performing regions due to their high concentration of knowledge economy workers and high levels of foreign investment. Such is the case for several countries, including Poland, Greece, and Bulgaria.

• While the best-performing Austrian and Italian regions (Vienna and Lombardy) are not in the top 10, nearly all regions in these countries score above the median region.

• While some Western Balkan regions perform well due to their high quantities of skilled labor and FDI, rural regions in these countries perform relatively poorly.

Introduction

Innovation and competitiveness drive productivity, economic growth, and welfare growth. However, as countries seek to improve their innovation capacity through national strategies, they often overlook substantial subnational differences in innovativeness. This report seeks to close those gaps by analyzing the subnational innovation competitiveness of 13 countries: Austria, Albania, Bosnia and Herzegovina, Bulgaria, Germany, Greece, Hungary, Italy, North Macedonia, Poland, Serbia, Sweden, and the United States.

Since the last iteration of this report, innovation’s relevance to states’ global economic standing has only grown. In a time marked by rapid technological change, supply chain disruptions, and geopolitical uncertainty, nations and regions alike must continually advance their competitiveness through innovation. Furthermore, China’s explicit challenge to the techno-economic leadership of the United States and its transatlantic allies demands a strategic response. Mario Draghi’s 2024 report underscores the European Union’s lagging competitiveness, while U.S. presidents Trump and Biden have prioritized amplifying American innovation in key technology areas during each of their presidencies.

Ecosystems that support scientific and technological development require substantial coordination and foresight. Research institutions, universities, start-ups, corporations, investors, and government bodies must collaborate to develop and diffuse knowledge and technologies, drawing on skilled individuals, robust infrastructure, and extensive funding (especially for research and development [R&D]), to support experimentation and implementation.

National and subnational ecosystems work in tandem to supply ingredients. While national governments may be responsible for setting regulatory policies, establishing education systems, and developing funding mechanisms, subnational actors make policy decisions that recognize unique local talent pools, resources, infrastructure, and industry capabilities. Thus, it is crucial to consider both national and subnational benchmarks for competitiveness to understand how regions and nations alike can maximize their potential for innovation and growth.

The Global Innovation Index (GII) and the European Innovation Scorecard (EIS) are prominent tools that provide comprehensive assessments of innovation performance on a global and regional scale. The GII offers a multidimensional perspective on innovation, evaluating factors such as R&D investments, human capital, and business sophistication, which collectively contribute to a country’s innovation capacity. Similarly, the EIS provides a detailed analysis of innovation trends and capabilities within EU member states, facilitating benchmarking and policy evaluation.

In line with the GII and EIS, the Global Trade and Innovation Policy Alliance (GTIPA) has contributed significantly to the discourse on innovation competitiveness through its series of insightful subnational innovation competitiveness reports, which provide nuanced insights into the intricate relationships between innovation, economic development, and regional competitiveness, offering valuable perspectives for policymakers, businesses, and researchers alike. This report, the “Transatlantic Subnational Innovation Competitiveness Index 3.0,” builds on two prior iterations of the Index, expanding the analysis to cover 213 regions in 13 countries. This report also, for the first time, includes an indicator on artificial intelligence (AI).

This report introduces the Index’s indicators and then assesses each region’s performance thereon. It concludes by providing policy recommendations to the 13 countries on how to boost their subnational innovation competitiveness, tailored to their unique strengths and weaknesses.

The Index

This third edition of the “Transatlantic Subnational Innovation Competitiveness Index” captures the innovation performance of 213 subnational regions across 13 countries: Austria (9 regions), Albania (12 regions [garge]), Bosnia and Herzegovina (3 entities), Bulgaria (28 provinces [oblasti]), Germany (13 federal states), Greece (13 regions), Hungary (8 regions), Italy (20 regions), North Macedonia (8 regions), Poland (17 regions), Serbia (25 districts), Sweden (7 regions), and the United States (50 states). In this report, we refer to all subnational entities, states, provinces, and districts as “regions” to simplify the analysis.

This report consists of 14 indicators representing the relevant determinants of a successful innovation ecosystem, grouped into three categories:

• Knowledge Economy: Indicators measure the educational attainment of the workforce; immigration of knowledge workers; employment in professional, technical, and scientific (PTS) activities; and manufacturing sector productivity.

• Globalization: Indicators measure high-tech exports and inward FDI.

• Innovation Capacity: Indicators measure a region’s expenditures on R&D, the number of R&D personnel, venture capital (VC) investment, the creation of new businesses, patent output, share of households subscribing to broadband Internet, and the extent of progress toward decarbonization.

The most heavily weighted category of the Index is innovation capacity, which accounts for 55 percent of the Index’s weight, while knowledge economy indicators account for 33 percent, and globalization indicators account for the remaining 12 percent.

Due to variations in data availability across nations and regions, certain indicators include data from varying years by country.

Also, this report assesses a 14th indicator: AI preparedness. This indicator is not included in the calculation of the final Index score, but is included in the report due to the growing understanding of how critical AI integration is and will be to economic growth, development, and innovation in the future. AI preparedness is measured by whether a region has a regional AI policy plan or strategy.